What is a taxpayer rating

The taxpayer's rating is an assessment formed by the SRS regarding a company's compliance with tax obligations.

Every company for which a rating calculation has been performed can see their rating and an explanation of how it is formed in their EDS profile. The rating indicators serve as an explanatory roadmap for improvements:

  • Green indicators are the ones that have been met.
  • Yellow indicators require attention and improvement.
  • Red indicators are critical and need to be improved.

This explanation of how the rating is formed is visible only to the company itself.

The taxpayer rating serves an informative purpose.

What rating can a company get

A

Good compliance. The company has no significant tax violation risks. 

B

Compliance needs to be improved. Overall, the company fulfills their obligations to the state, but there is room for improvement – timely submission of declarations, declaring and paying all taxes on time.

C

Compliance violations. The company has been excluded from the VAT payer register due to violations or the SRS has decided to suspend their economic activities. The ability of such companies to fulfill their business obligations is critically evaluated, and if the company's economic activity is suspended, transactions with them are prohibited by law.

N

Inactive taxpayer. According to the information available to the SRS, the company is not engaged in economic activities. When starting cooperation with such a company, it should be taken into account that for at least 6 months there have been no declared transactions or their size has been small, there have been no employees, or salaries have not been paid.

J

Newly registered taxpayer. The company was established within the last 6 months. Although it has not yet proven itself through work, any new beginning that is being built conscientiously is commendable.

For which companies the taxpayer rating is formed

Ratings are provided for:

  • all commercial enterprises,
  • branches of foreign companies,
  • subsidiaries of capital companies from EU member states, Iceland, Norway, and Liechtenstein,
  • agricultural holdings submitting annual reports,
  • fishing enterprises submitting annual reports,
  • individual businesses submitting annual reports.

How is the taxpayer rating formed

When determining the taxpayer rating, the SRS uses six sets of indicators characterizing compliance with tax obligations. The indicator’s value is assessed on the rating determination date (for example, tax debt status) or for a specific time period (such as wage level, imposed administrative fine amount).

The rating is reviewed at least four times a year.

The rating consists of six sets of indicators characterizing tax compliance:

  1. Registration data. The SRS checks whether insolvency proceedings have been initiated, whether economic activity has been suspended, whether the company has not been excluded from the VAT register. The rating is also influenced by the historical information of the company's official in the field of tax compliance.
  1. Timely submission of declarations and reports.
  1. Payment of taxes. For a good rating, it is important to pay taxes on time and in full, but in a situation where a debt has formed, apply to the SRS in time on your own initiative and agree on the payment of the debt in installments.
  1. Penalties and tax payments calculated by the SRS. Anyone can make mistakes, and penalty payments are possible even for conscientious companies. However, it is important that the share of taxes calculated by the SRS control department is small compared to overall tax payments, and for the amount of fines not to indicate a serious violation.
  1. Job salary assessment. The SRS compares the gross wage in the company with the average gross wage level both in the relevant industry and region, as well as in the country. Atypically low salaries can indicate the risks of precarious wages and therefore lower the rating.

The information about employees who have not received wages in a specific month, such as those on extended leave, is not used in calculating the company's average wages and salaries.

  1. Tax declaration risk assessment. The rating can be reduced by the risks revealed in the SRS risk analysis.

The determination of the taxpayers’ rating is carried out according to specific criteria in several sequential selection steps using the exclusion method, i.e., companies included in any of the rating classes are no longer evaluated in subsequent selection steps. A company can receive one out of five such rating evaluations.

J – newly registered taxpayer

  • Companies registered no earlier than 6 months before the rating determination date

The risks identified for these companies are not taken into account in determining the rating, however the company can familiarize itself with the existing risks that may affect the taxpayer rating in the future in the “Indicators” Taxpayer Rating section of their EDS profile.

  • Companies registered after the rating determination date

For these companies, the rating determination date will be the company's registration date. No risk assessment is carried out, and detailed information about the taxpayer rating is not available in the EDS.

N - inactive taxpayer

Companies that do not engage in active economic activities according to the data available to the SRS. In the SRS assessment, these are the companies whose total declared tax amount for the last six months, as stated in the submitted declarations and reports, does not exceed EUR 750 and meet at least one of the following criteria groups:

  • Companies are excluded from the SRS's VAT payer register due to not conducting economic activities.
  • Companies meet all the following criteria at once:
    • no declared work income.
    • tax payments to the state budget have not been made, or their total amount does not exceed EUR 150.
    • The total value of transactions declared in VAT returns for the assessed period does not exceed EUR 750 (for members of VAT groups, the total amount of declared transactions for supplies of goods and services domestically and within the territory of the European Union (EU), as well as export transactions is assessed).

The information available to the SRS regarding the economic activity of these companies is also evaluated, which should result in tax obligations according to the SRS. These companies can familiarize themselves with it in their profile in the EDS Taxpayer Rating section “Indicators® “Tax Declaration Risk Assessment”.

Other risks identified for these companies are not taken into account in the rating determination.

C – Compliance violations

  • Companies for which the SRS has decided to suspend their economic activity.
  • Companies that have been excluded by the SRS from the SRS’s VAT payer register due to violations detected in the field of tax compliance and whose registration in the SRS’s VAT payer register has not been renewed.

Although other risks identified for these companies are not taken into account in determining the rating, the company can review them in their profile in the EDS Taxpayer Rating section "Indicators".

B – Compliance needs to be improved.

Companies that do not meet the J, N or C rating criteria and have significant tax compliance risks in one of the areas assessed by the SRS..

  • Companies that have one or more significant risks in the field of tax compliance:
    • there is a tax debt that exceeds EUR 150 at the end of the previous month and the ratio of the tax debt to the tax contributions made indicates the risks of non-payment of the tax debt.
    • at least one of the risks in the salary payment assessment has been identified:

      The information on employees who have not received wages in a specific month, such as those on extended leave, is not used in calculating the company's average wages and salaries.
      • Comparison of the wage and salary level:
      • Non-declaration of employees and wages and salaries:
        • economic activity is carried out (the total transaction value is declared in the taxpayer's VAT declarations), but the mandatory state social insurance contributions are not declared in employer’s reports.
        • "employer reports" have not been submitted or employees with income have not been declared in the "employer's reports", although:
          • employees worked at the construction site (data from the Unified Electronic Working Time Record Database).
          • employees carried out passenger commercial transport with a passenger car or taxi (data from the website or mobile app service providers).
          • at the employer’s request, at least three foreigners have been granted the right to employment (data from the Office of Citizenship and Migration Affairs).
    • at least one of the VAT risks used in determining the rating has been identified:
      • after the transaction is completed, counterparties are excluded from the SRS’s VAT register at the initiative of the SRS – such transactions are deemed as transactions with risky counterparties who have been found to commit tax violations.
      • the declared amount of VAT payable to the budget indicates potential VAT losses - the nature of the transactions declared in the taxpayer's VAT declarations suggests that the taxpayer's transactions are mostly carried out within the territory of Latvia, but as a result, the amount of VAT payable to the budget is minimal.
      • the amounts of declared EU acquisitions and EU supplies indicate potential VAT losses - the largest share of transactions declared by the taxpayer in the VAT declaration consists of intra-EU acquisitions and deliveries to EU member states, which may indicate the provision of potential intermediary functions to taxpayers from other EU member states involved in the chain of transactions.
      • deliveries of goods or services provided are not declared, although Latvian counterparties have declared purchases of goods or services received.
      • the VAT refundable to the budget has been declared for this and at least the two preceding years, but no or minimal supply of goods or services has been declared.
    • no more than two tax returns and/or reports have been filed.
    • no annual report for the last fiscal year has been submitted.
    • no bank accounts declared.
    • the initiated process of exclusion from the SRS’s VAT register was interrupted more than twice.
    • the transfer of the company has been determined.
    • as a result of the tax audit and/or tax inspection the calculated additional tax amount payable to the budget exceeds 10% of the company's state budget tax payments.
    • as a result of the customs declarations inspection, the calculated additional tax amount payable to the budget exceeds the company's state budget tax payments.
    • as a result of tax inspection or other measures for the administration of taxes, administrative penalties have been imposed for established significant violations in the field of taxation or customs.
    • average wages and salaries do not reach 25% of the average wages and salaries in the country’s private sector (compared to the CSB data on the average monthly gross wages and salaries in the country in the first quarter of 2024https://data.stat.gov.lv/pxweb/lv/OSP_PUB/START__EMP__DS__DSV/DSV010c)
    • a decision has been made regarding the imposition of a fine for non-submission of transfer pricing documentation.
    • the company or its official is subject to international or national sanctions.
    • the status of Authorized Economic Operator (AEO) in customs has been revoked due to the identified violations.
    • tax debt collection activities have been carried out.
    • other risks identified for the company or official not mentioned above.

The company can review all the identified risks, as well as more detailed information, such as the period for which the risk is assessed, in their EDS profile in the Taxpayer Rating section "Indicators".

  • Companies with signs of significant tax non-declaration risks.

According to their own declared information, companies do not carry out active economic activity, but according to the information available to the SRS, there are signs indicating significant risks of non-declaration of taxes. In the SRS assessment, these are such companies for which the total amount of taxes calculated for the contribution to the state budget declared in the submitted declarations and reports for the last six months does not exceed EUR 750 and at least one of the following groups of criteria is fulfilled:

    • companies are excluded from the SRS VAT payer register due to the fact that they do not carry out economic activity.
    • companies meet the following criteria all at once:
      • no declared income from work.
      • no tax payments to the state budget have been made or their total amount does not exceed EUR 150.
      • the total value of transactions declared in VAT returns for the assessed period does not exceed EUR 750 (for members of VAT groups, the total amount of declared transactions for supplies of goods and services domestically and within the territory of the European Union (EU), as well as export transactions, is assessed).

And for these companies, at least one of the signs indicating significant risks of non-declaration of taxes has been identified:

    • Latvian counterparties have declared purchases of goods or services received from the company, and the total value of these declared transactions excluding VAT is more than EUR 750.
    • the amount of input tax declared in VAT returns is more than EUR 150.
    • discrepancies have been identified in transactions with EU companies.
    • the declared total value of the exported or imported goods is more than EUR 750.
    • according to the employee information submitted, there are current employees, but no employer reports have been submitted.
    • employer's reports have not been submitted or no employees with salary have been declared in the employer's reports, although the employees worked at the construction site (data from the Unified Electronic Work Time Logging Database)
    • at the request of the company, at least one third-country national has been granted the right to employment (data from the Office of Citizenship and Migration Affairs).
    • income from the carriage of passengers by passenger car or taxi is earned (data provided by the website or mobile application service providers)

The other risks identified for these companies are not taken into account in the rating determination. The company can review all the identified risks in their EDS profile in the Taxpayer Rating section "Indicators".

  • Companies that have declared bankruptcy.

Other risks identified for these companies are not taken into account in the rating determination. The company can review the identified risks in their EDS profile in the Taxpayer Rating section “Indicators”.

A – Good compliance.

Companies that have good tax compliance, without significant risks in tax compliance, and that do not meet the criteria for ratings B, C, N and J.

The company can review the identified relatively insignificant risks in their EDS profile in the Taxpayer Rating section "Indicators".

It should be noted that the SRS may also have other risk information about the taxpayer at its disposal, including information characterizing a separate indicator, the disclosure of which to the taxpayer is prohibited for the SRS by national and international regulatory enactments, but it is not used to determine the publicly available rating assessment and does not affect the taxpayer's rating.

It should be taken into account that the SRS will continue to use this information in tax administration measures for all taxpayers, regardless of the overall assessment of the taxpayer's rating.

The exact information on the time period of data and information used to determine the specific indicator for its rating can be viewed by the company in its EDS profile.

Indicators that characterize the existence of a fact are evaluated as of the rating determination date.

Indicators that assess the company's performance in fulfilling tax obligations are evaluated for a certain period of time – from 2 months to 3 years.

As of the date of determining the rating,  indicators such as tax debt status, compliance with extension deadlines, facts related to suspended economic activities according to the decision of the State Revenue Service, facts related to insolvency proceedings, information on applicable sanctions for the company or its officials, etc, are evaluated.

For the period of:

  • two months – assesses whether the company has made a decision on non-contentious recovery, whether a decision has been made on the voluntary execution of overdue tax payments.
  • six months – assesses the fact of submission of declarations and reports and delays in the deadline for submission, analyzes the information provided in the taxpayer's declarations and reports, evaluates the calculated tax amounts declared in the declarations and reports for payment to the state budget, and assesses tax contributions made to the state budget, assesses the VAT risks used to determine the rating, evaluates the level of wages and salaries by comparing to  national and regional averages, evaluates third-party data on non-declaration of employees and wages.
  • 12 months - assesses the tax debt recovery operations carried out by the SRS, the amount of administrative fines imposed for violations detected in the field of taxes and customs, the amount of taxes and customs payments calculated in addition to payment to the budget as a result of tax and customs administration measures, the information received from the State Labour Inspectorate regarding detected cases of illegal employment, etc.
  • 36 months – assesses information on the actions of the company's officials in the field of compliance with tax obligations and exclusion of the company from the SRS’s VAT register.

What benefits do "A" rated companies receive?

Companies with an A rating have proven their integrity. Therefore, SRS does not plan control measures for them (unless warranted) and provides priority support if the company needs it. In general for A-level companies, SRS plans only those control measures imposed on Latvia by international obligations – customs controls established throughout the European Union and transfer pricing controls established at the OECD level for transactions between companies.

A-rated companies receive several benefits from SRS in taxes and customs to make relations with the state as convenient and simple as possible.

What information about the rating is publicly available?

Anyone interested is able to view the company's taxpayer rating assessment in the database published by the SRS.

More detailed information about the taxpayer's rating indicators will also be visible in the future only to the company itself and will not be publicly available.

The law behind this initiative

The Law On Taxes and Fees requires: 1) the SRS provide a publicly available overall assessment of the rating of taxpayers to promote the voluntary fulfillment of tax obligations and 2) the right of taxpayers to receive information from SRS through EDS on the indicators for fulfillment of tax obligations that SRS used to determine the overall assessment.

Contact information for questions about the rating system

If you have any questions about your rating, we will be happy to answer them and help you make full use of this new tool.

You can ask through EDS in the "Correspondence with the SRS" section, selecting the "Taxpayer rating" category or by calling the special helpline at +37167120022.